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/ ment of industrial relations for 4 years and also as director of the department of industrial relations for the State of Alabama for 4 years. I do not have anything to add to my written statement. I am just glad to have this opportunity of putting this in the record, because the written statement outlines my personal feelings as well as the feelings and views of these organizations which are in opposition to the Reorganization Plan No. 1.
The CHAIRMAN. Mr. Wilson, do you have any questions?
Mr. KARSTEN. I have a question I would like to ask the witness. In your State of Alabama how do you operate your unemployment compensations in your employment service, can you tell me?
Mr. BROADWAY. Yes, in Alabama unemployment compensation and employment service functions are part of the Alabama Department of Industrial Relations. However, in addition to that department we have a department of labor.
Mr. KARSTEN. What other functions do you have in the department of industrial relations? Do you have other functions besides these two specific functions?
Mr. BROADWAY. Yes, in addition to these two specific functions we have coal mining and factory inspection, child labor, workmen's compensation,
Mr. KARSTEN. Doesn't that give a little prejudice from the workers' standpoint you have inspection there in the enforcement of your child labor laws? Wouldn't that give a little prejudice? I have not seen your statement, but I assume it was based on the same thinking we heard from other witnesses.
Mr. BROADWAY. Well, my statement as you will see sets forth the prime factor that in order for employment service to function satisfactorily that it must be public acceptance and must have public confidence, and that is a prime factor in my statement.
However, if I may just add right along the lines to which you are referring with respect to the State set-up, when thought was given to the establishment of the department of labor and also the establishment of the department of industrial relations, the legislature attempted, so they said, to draw a line between what was remedial, that is more or less servicing, and then what was regulatory.
Mr. KARSTEN. Well, as I see it you have two departments of labor in Alabama.
Mr. BROADWAY. Well, in some States it would amount to that.
Mr. Wilson. Mr. Broadway, what is your opinion about transferring both these functions entirely back to the States?
Mr. BROADWAY. Well, of course I think that all of the administrative responsibility, as well as the policy-making functions should be at the State level.
Mr. Wilson. If that were true, what part of it would come from some Federal agency having anything to do with either one of them?
Mr. BROADWAY. Well, offhand I cannot see that there would be any.
Mr. WILSON. It would just be a waste of money, would it not? Mr. BROADWAY. That is right.
Mr. Wilson. Haven't the States had enough experience up to now-we all admit this is a practically and comparatively new thingto run both these matters locally to better advantage to the workers in each separate State?
Mr. BROADWAY. Well, of course, in Alabama we were one of the first States to enact an unemployment compensation law, and the program has been in effect there since 1936 which gives us about 12 years' experience.
Mr. Wilson. Well, I say comparatively speaking that is new.
Mr. BROADWAY. I think so. We certainly know what our economic and social and industrial conditions are there, with which we are associated constantly, daily, better than somebody, no matter who it might be, a thousand miles away.
Mr. HOLIFIELD. Will the gentleman yield?
Mr. HOLIFIELD. Mr. Broadway you are aware of the fact that last year you received in the State of Alabama $175,000 more than was collected in Alabama for the administration of your Service Readjustment Act and your UC, and your USES. If this did all go back to the State then you would be penalized in the State of Alabama $175,000.
Mr. BROADWAY. Of course that is an occasion if the Employment Service were back—no doubt your figures are correct.
Mr. HoLIFIELD. I am speaking about the three-tenths of 1 percent which the gentleman from Texas questioned you on. If
return all of the 3 percent that is retained by the employers, you would run a deficit. of $175,000 in your State for the administration of these services.
Mr. BROADWAY. That is based on last year's operation and allocation of administrative funds?
Mr. HOLIFIELD. That is right, and as your unemployment increases that deficit will increase because your administrative costs would increase and your income payments would decrease.
Mr. BROADWAY. Well, offhand I do not think Alabama would stand to suffer a situation of that kind because, for instance, now there are in operation in the State, as I recall, more than 60 employment offices where in normal times or I would say prewar times there were only in operation about 20 local employment offices, so it would seem that as this readjustment allowance program and other things having to do with veterans' services diminish, the administrative costs should likewise diminish.
Mr. HARDY. Can you tell me how much money was allocated to the State of Alabama last year for the unemployment compensation, the administration of unemployment.
Mr. BROADWAY. Of just unemployment compensation? No, sir, I cannot. As I say, I was not associated with the administration of the program during last year. I resigned January 1947.
Mr. HARNESS. How much is in the budget for this year?
Mr. HARNESS. Do you know how much the State of Alabama contributed to the fund, the three-tenths of 1 percent paid by employers?
Mr. BROADWAY. No, I do not because I have forgotten what our total annual pay roll was.
Mr. HARNESS. You stated you thought it would be better if this program was turned back to the States. If that were done, you in Alabama would collect all of the three-tenths of 1 percent and keep it there?
Mr. BROADWAY. Yes, sir.
Mr. HARNESS. Well now, do you have enough to service your program if you were left on your own?
Mr. BROADWAY. I would think as a general matter we would.
Mr. HOLIFIELD. Will the gentleman yield? I will give him the exact figure on that.
The total income from Alabama was $1,734,000, and three-tenths of 1 percent will give you the figure; the expenditure for the services was $2,049,000.72, which shows roughly a deficit of $175,000 which was brought from rich States like Illinois, California.
Mr. Judd. Would that include the unemployment benefits as well as the administration?
Mr. HOLIFIELD. That includes administration only.
Mr. HOLIFIELD. I said three-tenths of 1 percent of the figure I gave would give you the exact figure for administration.
Mr. JUDD. Well, how much of the money that went back was for administration of that two million something that was for benefits? Was that all for administration or was that for benefits, too?
Mr. HOLIFIELD. That was for administration. You still have the $175,000 deficit. In 23 States of the Union you run a deficit and in 25 States a surplus.
Mr. JUDD. Administration or total program?
Mr. HARNESS. Who makes up the deficit? Every time that California pays in the 2.7 is earmarked for California. Nobody can take any part of it.
Mr. HOLIFIELD. That is right, but the three-tenths of 1 percent is transferable to the States to help administer their program, and Alabama is one of them that needed $175,000.
Mr. HARNESS. If there was any deficit in Alabama it was only for administrative purposes.
Mr. HOLIFIELD. That is right. That is why I brought out the point that three-tenths of that would be your administrative expense.
Mr. BROADWAY. We have in our trust fund about $60,000,000 which is to be used solely for the payment of unemployment.
Mr. HARNESS. You still think if you are left on your own you could do it better?
Mr. BROADWAY. You mean with respect to this three-tenths of 1 percent would that be ample to take care of administrative costs?
Mr. HARNESS. Yes.
Mr. HARNESS. You could take care of your whole program more efficiently?
Mr. BROADWAY. We would do it on our own independently of any other industry.
The CHAIRMAN. Thank you very much.
Mr. Manasco. Let me ask the gentleman a question here. Frankly, have you made any studies about how much additional funds would be needed by the State of Alabama in case the Congress were foolish enough to pass the Fair Employment Practices Committee legislation creating a Fair Employment Practice Committee?
Mr. BROADWAY. No, sir, you got me there. I do not have any idea.
Mr. MANASCO. That would fall in the jurisdiction of the Employment Service, would it not?
Mr. BROADWAY. Yes, because it immediately becomes a matter of referral, who you refer to and how, all the conditions.
Mr. Manasco. Then if we are foolish enough to pass that law, it would be necessary for us to get more Federal funds than we are now getting to carry out the program, would it not?
Mr. BROADWAY. You might have to go more thoroughly into this screening process that somebody referred to.
Mr. Manasco. You may have to have two or three detectives in the Department of Justice there watching every applicant that comes up for a job to see whether or not he has discriminated against somebody because he might be a Baptist, Methodist, or Holy Order.
Mr. BROADWAY. That is right. Thank you, sir.
STATEMENT OF R. K. ARGO IN BEHALF OF THE ASSOCIATED
INDUSTRIES OF ALABAMA
Mr. ARGO. Gentlemen, my name is R. K. Argo, personnel director, Alabama Mills, Inc., and a member of the Associated Industries of Alabama, in whose behalf I am appearing. My appearance here today is to place our association officially on record as favoring House Concurrent Resolution 131 submitted by Mr. Hoffman. We strongly oppose making the United States Employment Service and Bureau of Employment Security a permanent part of the Department of Labor.
First, we feel that this is definitely a public program and not just a labor program. We feel that this program should not be controlled by either business or labor, but by an impartial agency in the interests of all groups.
Take the Labor Department today: Two of the Assistant Secretaries are chosen from the ranks of the AFL and CIO, who represent only a small minority of workers throughout the country. We believe it is a recognized fact that the Labor Department today serves only the interests of labor, and not of business. Therefore, you can readily ,
, see what would happen if you place these agencies under the Department of Labor. It would dictate to the States, when, how, and who would receive benefits, and rules and regulations for job referrals. Let's take the example of "suitable work." Those claiming unemployment benefits under State laws are considered eligible to receive benefits only so long as they are willing to take suitable work and apply for suitable work when it is referred to them by State employment offices.
We ask this question, “Should the Labor Department determine what is suitable work?” Our answer is “No." Because it is common knowledge that organized labor has continually tried to break down the rules and regulations which the State agencies have set up as to what is suitable work. As yet they have been unsuccessful. We contend that each State agency is certainly in a position to know what is suitable work in their locality. Each agency is in a far better position to know the nature of the jobs, working conditions, and standards than a Federal agency.
Now, gentlemen, I want to say a few words about experience rating. All States but one have experience rating which provides for varying schedules of tax rates for employer contributions to the unemployment compensation system, depending entirely on the employment experience in their business. This has contributed substantially to stabilization of employment and by doing so has saved around 242 billion dollars of unemployment cost and taxes. Gentlemen, we believe that should the Labor Department secure control of these agencies, that experience rating would be greatly endangered. Why? Because organized labor has always opposed experience rating and inasmuch as we would have CIÒ and AFL representatives in top positions of the Department of Labor, you readily see why experience rating might be out the window. Why? Because experience-rating provisions in State laws are subject to the approval of the Federal agency which administers the law. Do you think organized labor in the Department of Labor would approve experience-rating plans now in effect? This certainly does not seem likely after having opposed it for a long period of time.
In closing I want to say that business has a definite interest in this program, as well as labor. Therefore, these agencies should not be under the Department of Labor, but should function as an impartial agency
Remember, gentlemen, business is paying the bill.
I have only one observation that I would like to make other than my statement.
Yesterday morning I was at the hearing and Mr. Schwellenbach was the witness. Mr. Harness asked him a question and he answered it as a member of the Labor Department. I would like to answer that question as an employer.
Mr. Harness, if I remember correctly, you asked Mr. Schwellenbach the question did he think that the employers would use the United States Employment Service; had the confidence in the Employment Service, if it was in the Department of Labor in a partial agency. Is that correct?
Mr. HARNESS. That is right.
Mr. Argo. I would like to answer that as an employer, that we would not. I will give you the reason why. In your top officials in the Department of Labor you have two representatives of organized labor. They only represent a minority of the workers in this country, and we feel that definitely they would have a lot of control over policymaking and control over Employment Service, and we would definitely not feel free to use the Employment Service.
Mr. HARNESS. In other words, you would be fearful of the policy laid down and the rules and regulations established by the Department of Labor under which you would have to operate?